Far right and criminals drive Bitcoin’s value

Bitcoin has had a bad start to the year by tumbling, extending its slide from a record $19,511 reached on Dec. 18 to $13,440 as of 3:55 p.m. in New York, down 6.1 percent from Friday, according to data compiled by Bloomberg.

Bitcoin has drawn investors keen to make a buck, not realising that its only value lies in spivs saying it has value.

But the real value of Bitcoin has little if nothing to do with its artificial scarcity or popularity as a medium of speculation.

Drug dealing, cyber-fraud, prostitution, gun-running and other major crime profits are being ploughed into internet currencies like Bitcoin, according to Scotland Yard. And the IRS is now looking for tax evaders using Bitcoin for their nefarious purposes.

In other words, Bitcoin’s value has soared because it’s used by people breaking the law.

Bitcoin is also enabling right-wing and alt-right extremist groups. The Southern Poverty Law Center (SPLC) is tracking an estimated 200 Bitcoin wallets owned by right-wing extremists and it says they have seen an increase in people on the far right moving their assets into the digital currency, and using it “for ordinary business purposes.” This has seen it more than quadruple in value.

“Bitcoin is allowing people in the movement to go beyond cash in an envelope or a check,” Heidi Beirich, head of the Intelligence Project at the SPLC, told the Washington Post. “It’s really a godsend to them.”

Richard Spencer, the prominent member of the alt-right, a movement that espouses racist, anti-Semitic and sexist views and seeks a whites-only state, has declared bitcoin “the currency of the alt right.”

We are entering unknown territory.

As John Gapper writes in the Financial Times, many people appreciate having a shadow system, like Bitcoin. “Whether they know how it works, and the risks they are taking, is another question. From past experience of financial crises, it is likely that no one really does,” he writes.